Archives For CFO

Collaboration, collaboration, collaboration should be the new mantra for corporate evangelists. Speaking at our Asia CFO summit last week, I had the temerity to suggest that finance had to up its game in working cross-functionally, and that future business growth was dependant on greater collaboration between the CFO function and the rest of the executive team. In a customer focused and digital knowledge economy, collaboration is king to evolving the business model, realigning operational processes and mining (in particular) the enterprises’ intellectual capital to create value. Consider one of today’s most prized enterprise assets – data. Today, there are countless examples of savvy enterprises who continue to invest in breakthrough technologies to leverage the power of the data at their disposal. Yet we also know that many enterprises still aspire to a single source of data truth. Functional responsibilities continue to blur in the great data debate, and the unspoken question at the C Suite table remains this: who takes ownership or leads the enterprise wide agenda in this critical asset class?

I am duty bound to say the CFO function has an outstanding case to take the leadership role here. The CFO is the steward of corporate value, the keeper of the purse strings, and it is they who must primarily drive required enterprise ROI. But in today’s connected environment, understanding and leveraging the value of enterprise IP is critically dependant on reaching out and building alliances with the CMO, the CIO, the CHRO and other new emerging C suite roles; the assets and processes that create corporate wealth today typically have little respect for functional boundaries. The data example provides an outstanding opportunity for CFOs to move the dial on peer collaboration. Collaboration of this kind will bring much greater clarity and agreement across the executive table on the processes that will create value in the future, it will mean a much more effective capital allocation strategy for the business, and it should help the CFO lead a clearer line of sight tracking, measuring and reporting on the enterprise activities that matter most.

Collaboration, collaboration, collaboration. A new year’s resolution for every CFO.

By Palma Michel, former CFO headhunter and founder of the Mindful Leadership program at BeYoCo

The world as we know it has changed dramatically since 2008 and there has been more volatility in the past eight years, than over the past 30 years. It sounds like a cliché but we live in a world of constant change, increased complexity and uncertainty. Applying yesterday´s business solutions and behaviours to today´s and tomorrow´s problems does no longer work. It is no longer about “what” someone does but “how” they go about it.

In order to initiate or guide skilful change we need to be present to what is here, not what we thought would be here or to what was here yesterday. We also need to be able to hold ambiguity and be comfortable with the unknown.

What typically gets into our way to do this is our nervous system. We evolved in circumstances that did not change as intensely as the circumstances we find ourselves in today. Back millions of years in evolution, our reflexive bottom-up mind or reptilian brain (amygdala) favoured short-term thinking, impulse and speedy decisions. Whenever the amygdala perceived something as a thread this led to a fight, flight freeze reaction. While this was useful when our ancestors were attacked by a tiger, fast forward to now, the problem is our amygdala still goes off when it perceives something as a threat, which typically happens when we are faced with an unknown situation; but it could also just be a full inbox, a budget meeting, etc. The other problem is that fMRI scans show, that what mostly switches on our amygdala are not even external circumstances but our very own thoughts. Our amygdala is also much faster in brain time than our executive brain and as a result we often react to what we think is here and fall into habitual reactive patterns instead of being able to respond according to what the situation requires.

According to Professor Jeremy Hunter from the Peter F. Drucker Graduate School of Management, contemporary management education has largely overlooked creating an educational process as systematic as accounting and financial analysis for managing oneself. Professionals are left to fend for themselves to know how to skilfully handle and transform the inner forces of emotions, physical sensations, thoughts and beliefs.

Neuroscientist Richard Davidson and his team suggest that mindfulness training can change our in-built response to pressure and demands; by strengthening our executive brain (the left side of the prefrontal cortex) as well as the white matter between the amygdala and the executive brain. By dampening down the amygdala, the prefrontal cortex is able to quiet signals associated with negative emotions, enabling the brain to plan and act effectively.

As such mindfulness practice is not a nice to have but a core capacity for managing today. Mindfulness training in the business world means examining our underlying assumptions and what we are doing while we are doing it – moment by moment. With mindfulness we begin to uncover the workings of our own mind, seeing how the filters of our mind effect our focus, engagement, perceptions, decisions and strategies.

Mindfulness training can be a capacity to effectively meet adaptive challenges, which are those challenges that require us to do something different and to develop a new way of operating in the world. Training in mindfulness helps us to say no to impulse and regain our capacity to be present in the midst of the current environment.

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As a sourcing advisor, I’ve been telling anyone who will listen that the robotic automation of business processes is set to fundamentally change the nature of the BPO market. The stark truth is that, to date, most of the real-life success stories have been in industry verticals such as telecoms, so, if robotic automation is to really live up to its full potential, then it should be able to have a significant impact on those generic business processes that are carried out across all industries, in particular finance and accounting, specifically accounts payable (AP).

To date, the biggest improvements in AP processing have been down to three approaches:

Getting manual information into the system electronically e.g. scanning and optical character recognition

Through our research at Source, we believe that robotic software automation presents significant further opportunities in a number of areas, including: cross-system manual processing, data gathering and reporting, reconciliation of matching errors, monthly account closure, bulk data updates and ERP IT processes. Some of the key ones are discussed below.

Cross-System Manual Processing

Typically, humans are used to providing a flexible interface between a number of different systems that are used in a process – this is colloquially referred to as ‘swivel chair processing’ – data is read by the human on one system or screen and keyed into another system, sometimes with additional steps inbetween.

Middleware can provide solutions to these interfaces but they are typically expensive and complex to implement. Software robots provide a much simpler implementation of the interface, carrying out exactly the same steps as the human but at a fraction of the price. This requires no or minimal system intrusion and provides 100% consistency with the process requirements.

For example: Barclays Bank work with robotic automation software has resulted in a £175 million p.a. reduction in bad debt provision in their Accounts Receivable function and over 120 FTE saved.

Reconciliation of Matching Errors

One of the most manually intensive processes in the finance function, and in AP particularly, is the reconciliation of errors due to incorrect matching of data between documents. Because this process requires inputs from different systems is inherently non-standard in each case and can require some judgement, it is usually carried out by humans.

By using inputs from other data sources, processing different matching options far faster, and applying semantic reasoning, robotic software automation can replace much of the reconciliation task, thus significantly reducing the number of people required.

For example, the excess queue procedure at the Co-operative Bank is carried out daily to accept, reject and return direct debits, cheques and standing orders. Overnight BACS (Bankers’ automated clearing services) processing results in a daily ‘queue’ of customers with payments due to leave their accounts and with insufficient funds to meet these payments. A nine-person team in the bank would have the daily responsibility of manually reviewing the 2,500 or so higher risk accounts. The automation of the entire procedure means that the bank now has a ‘virtual’ team of 20 people completing the workloads by 11am each day instead of a team of employees working to meet a 3pm daily processing deadline.

Monthly Account Closure

The monthly account closure is typically a complex process involving many data inputs, plenty of reconciliation and some elements of judgement. The number of people involved in the process is typically very high, and the time taken to close the accounts has a direct impact on the financial position of the company, but must be 100% accurate.

Previously, much of the reconciliation work has required human input across many data sources – robotic software automation combines a number of the approaches already mentioned into one critical process. By being able to access multiple data sources, make fast but relatively complex decisions (and to do that 24×7) software robots can significantly reduce the labour required, and the time taken, to close monthly accounts.

For example: a group of 250 NHS trusts have automated their month-end-close process. The process initially took 15 people 12 days; but it is now down to 2 people and half a day through automation.

With a software agent costing around one-third of a typical offshore Business Process Outsourcer FTE, and one-ninth of an onshore FTE, there are clearly some significant benefits to be gained from exploiting this new technology. Therefore, I would suggest a consumer of BPO services should be considering an ‘automation strategy’ as the best way forward. At the same time, I would urge the software vendors and BPO providers themselves to focus attention on this potentially huge opportunity. If you’d like to attend a free event on 27 November 2014 and hear from four speakers who have implemented RPA in their own organisations, then visit: http://www.source.co.uk/opinion/automation-blog/item/208-event-the-naked-truth-about-robotic-process-automation

By Palma Michel, former CFO headhunter and founder of the Mindful Leadership program at BeYoCo

As our modern worklife environment is dominated by information overload, 24/7 connectivity, multitasking and back-to-back meetings, the ability and space to focus has become a rare good for CFOs.

While you are reading this, chances are high that your attention will be distracted by an incoming email, a text, a colleague, a thought about the budget meeting or a ringing phone. Research also shows that you will most likely follow the distraction and find yourself caught up in something else other than finishing reading this post.

In his latest book Focus, Daniel Goleman states that while the link between attention and leadership excellence remains hidden most of the time, it ripples through almost everything we seek to accomplish.

Scientific research also shows that deep thinking requires sustained attention; the more distracted we are, the more superficial and trivial our reflections are likely to be. The ability to control our impulses and focus our attention has even been found to be a better predictor of academic success than IQ.

The 2010 Science article “A wandering mind is an unhappy mind” states that nowadays our attention is wandering involuntarily 46.9 percent of our waking hours. Neuroscience also shows that multitasking is a myth and actually makes us less productive, more susceptible to errors and increases stress. The results of this have shown to be decreased performance, wellbeing and productivity.

So what can we do to improve our ability to focus?

Janice Marturano, former General Counsel of General Mills and Founder of the Mindful Leadership Institute, states that improving focus starts when we begin to notice more and more that our ability to sustain attention even when we have time and even when we intend to be focused is becoming more and more limited.

Harvard Professor Ellen Langer advises to become a first class noticer by bringing a finely honed attention to every situation and a constant infectious sense of fascination with what is going on in the moment. According to Langer, first class noticers also question assumptions, previously relied-upon rules of thumbs and averages.

For neuroscientist Richard Davidson, contemplative practices such as mindfulness meditation can strengthen areas in the brain that are responsible for our ability to focus. The way he explains it, we all know that if we engage in certain kinds of exercise on a regular basis we can strengthen certain muscle groups in predictable ways; strengthening neural systems is not fundamentally different, it’s basically replacing certain habits of mind with other habits.

If you are still reading, well done, you managed to stay attentive.

Practical tips for improving your ability to focus:

Manage your technology instead of being managed by it: turn off instant email and text notifications.

The next time you receive an invite to a meeting, pause for a moment and reflect if you really need to be there and create space in your diary.

Cultivate a finely tuned attention to every situation by constantly applying a “fresh perspective” through questioning, inquiry and probing what´s going on in the moment.

Start training your muscle of attention through concentration exercises or contemplative practices such as mindfulness meditation.

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To my eternal dismay I don’t really get much time on the iPad these days. I don’t have to look far, however to find where it is – invariably it’s in the clutches of either my seven year old daughter (worrying), or my three year old boy (worrying, but for different reasons). Their relationship with this sort of technology however seems very intuitive, dare I say almost hardwired. Technology will be even more coded into their future daily existence, probably beyond the realms we can imagine right now. It’s fascinating to watch, and it’s an extraordinary time to be alive.

Today’s rate of advancement in technology is exponential but I can’t help but think the technology we are becoming accustomed to in our private lives isn’t quite reflected in our business lives. There is no greater example of this than what’s been happening (or not happening) in corporate finance organisations over the last decade or so. If the finance organisation is serious about driving value and supporting the business in its strategic imperatives, one of the things it has to get serious about is the technology it has at its disposal. I don’t, however, subscribe to the view that technology is the panacea to all of finance’s problems, the one-stop solution to deliver the sorts of financial and operational insights the business is crying out for… but it would be naïve to underplay its growing importance, particularly with the digitisation agenda.

So what’s stopping finance technology delivering on its promise? The obvious one is investment costs and multiple legacy ERP systems not being fit for purpose; too much manual workaround, too much time trying to get to the number rather than understanding and explaining to the business the implication of the number. Where we have seen investment in finance technology, typically the investment is focused on streamlining and driving down cost, rather than investing in the sorts of capabilities that are predictive and insightful. But there are arguably other issues too. Has finance shown the necessary finance leadership in the technology agenda? Does it truly understand and can it explain the business case for finance technology investment? Does a typical finance function “culture” present challenges to really embrace the opportunities that technology provides? Is it because finance is too risk averse? Why isn’t it adopting the cloud much? Is the payback on technology that creates insight rather than headcount reduction just too hard to quantify? Is it a capability issue with finance playing “catch up” on the skills it needs to make technology truly deliver?

I’ll leave with you a final thought – I think the corporate insight agenda offers CFOs and the finance organisation a great opportunity for internal influence and moving the dial on the corporate reputation of the finance department. I also think embracing and making the case for technology and tools is essential to achieving this. My observation is this: if finance doesn’t take this opportunity to lead the insight agenda, perhaps someone else will…